We write to share with you our concerns about H.R. 2281, the proposed Digital Millennium Copyright Act of 1998 adopted by the House on August 4. Although ostensibly intended to implement two international copyright treaties, the bill contains many extraneous, highly controversial provisions that have little or nothing to do with the WIPO treaties and that have not been the subject of any hearings in the Senate. We urge you to reject these extraneous provisions and to support, without further revision, the fundamental elements of H.R. 2281 that would implement the treaties.

Extraneous Matters

Sections 414, 415, 416, and 417, as well as Titles V and VI, of the bill appear to have been added by the House Judiciary Committee without debate. Some of these measures would fundamentally rewrite current law with profound consequences for decades to come. Among other things, they would reverse or effectively overturn three Supreme Court decisions: Feist Publications, Inc. v. Rural Telephone Service Corp., 499 U.S. 340 (1991); Bonito Boats v. Thunder Craft Boats, Inc., 489 U.S. 141 (1989); and Quality King Distributors, Inc. v. L'anza Research International, Inc., 118 S.Ct. 1125 (1998). To our knowledge, none of these measures has been the subject of hearings in the Senate. We urge that you reject the controversial items among these extraneous proposals. Presumably, if they represent good policy, the Senate can move to their consideration next year with a better idea about their likely intended and unintended effects.

Title V. This title apparently sets forth the views of the House Judiciary Committee on how best to provide legal protection against misappropriation of collections of information such as databases views which appear to track those of some of the largest and most powerful companies in the information industries. In December 1996, when the World Intellectual Property Organization Diplomatic Conference adopted the two treaties which H.R. 2281 is designed to implement, it pointedly declined to act on a third proposed international agreement concerning protection for databases. Title V would prematurely address the issue.

In so doing, it also would ignore the wisdom of the United States Supreme Court's Feist decision, which unanimously concluded that there were compelling constitutional and policy reasons not to extend copyright protection to facts as such.

The DFC and other critics of H.R. 2652, the House bill on which Title V is based, have expressed strong reservations about the measure's overbreadth and its potential deleterious effects on science, education, and information commerce. The Administration also has expressed serious concerns about the breadth and potential impact of the bill. In a recent letter, the General Counsel of the Department of Commerce said in part:

Any database misappropriation regime should provide exceptions analogous to "fair use" principles of copyright law; in particular, any effects on noncommercial research should be de minimis.

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The Department of Justice has serious constitutional concerns that the First Amendment restricts Congress's ability to enact legislation such as H.R. 2652, and that the Intellectual Property Clause also may impose some constraints on legislation of this sort. We note that those constitutional concerns are closely related, in many instances, to some of the points described above, particularly fair use, the effects on potential markets and transformative uses of data.

These constitutional concerns are reflected in a July 28, 1998, memorandum prepared by the Department of Justice's Office of Legal Counsel, which follows other critics of H.R. 2652 in questioning whether in the guise of providing protection against socalled "misappropriation," the bill may not in fact create a new form of intellectual property protection in factual information.

To enact the substance of H.R. 2652 as part of H.R. 2281 before interested members of the Senate have had an opportunity to fully deliberate on the important issue of data protection would represent a serious miscarriage of the legislative process. We urge you to reject Title V.

Title VI. Perhaps most puzzlingly, Title VI would provide special sui generis intellectual property protection for "certain original designs." The record of the floor discussion of H.R. 2281 in the House is entirely silent on the purposes of the title. Thus, the intended scope of its provisions is left in doubt.

As originally introduced in the form of H.R. 2696, the provision was intended as a specific response to the Supreme Court's Bonito Boats decision, which held that state laws prohibiting "plug molding" of boat hull designs were preempted by federal law. However, as it emerged (and is incorporated into H.R. 2281), Title VI confers new federal intellectual property rights on "the designer or other owner of an original design of a useful article which makes the article attractive or distinctive in appearance to the purchasing or using public." Although Title V's definition of a "useful article" appears to be limited to boat hulls, it could easily be expanded to cover automobile body and part designs, furniture designs, and clothing designs.

Enactment of Title VI would represent the "opening wedge" for a potentially farreaching reconceptualization of American intellectual property law. The DFC takes no position on the merits of the design protection issue, but we would nevertheless note that the issue is wholly unrelated to intellectual property rights in the digital environment and that it has been a source of serious disagreement in the industrial design and intellectual property communities for more than 20 years. It would be counterproductive to encumber deliberations relating to the issues at the core the Digital Millennium Copyright Act with such extraneous controversy.

Although some provisions of Title IV of H.R. 2281 are closely related to WIPO Treaty implementation, others are not. Like Titles V and VI, these extraneous provisions unnecessarily burden and complicate resolution of the core issues addressed by the Digital Millennium Copyright Act.

Section 414. This provision makes what ostensibly is only a clarifying change to Section 107 of the Copyright Act. In fact, the effect of the change could be to gut the protections for educators and consumers that were built into the statutory formulation of the "fair use" doctrine back in 1976. The House Report (No. 941465) accompanying the 1976 Copyright Act states that "the reference to fair use 'by reproduction in copies or phonorecords or by any other means' is mainly intended to make clear that the doctrine has as much application to photocopying or taping as to older forms of use . . . " In deleting the referenced phrase, H.R. 2281 would confuse rather than clarify the law relating to the scope of this important doctrine. As a result, copyright owners would be given new legal tools to use against schools engaging in educational photocopying and against both individuals who tape broadcast programs for personal use and companies which supply hardware for noncommercial home taping.

This potentially drastic revision to the "fair use" doctrine has not previously been considered by the Senate. Nor, to our knowledge, has it been the subject of any hearings in the House of Representatives. It appeared for the first time as part of the final version of H.R. 2281 submitted to the House for action on the suspension calendar, and even on that occasion no reference was made to it in any of the floor statements of the legislation's sponsors. We urge you to reject this controversial provision.

Section 415. This section consists of a series of complex amendments to an already-complicated legislative scheme: The Digital Performance Right in Sound Recordings Act of 1995. Unlike the carefully worked-out provisions of the original legislation, however, these amendments have never been the subject of any legislative deliberation whatsoever in either house of Congress. And they appear to be anti-technology, anti-competitive, and anti-consumer in their potential impact. They would permit the compulsory license rates assessed against new providers of digital audio services to be pegged far higher than those which now apply (and would continue to apply) to existing providers. As a result, new firms would be strongly discouraged from entering this developing marketplace, and future technological innovation in supplying digital audio services to consumers would be chilled. In effect, the amendments apparently would favor cable-based digital audio delivery over the alternative, satellite-based technologies.

In addition, Section 415 would introduce new uncertainty where the licensing of copyright works for purposes of "ephemeral reproduction" are concerned. It would require that digital broadcasters pay compulsory licensing royalties merely to make transmissions, which are otherwise exempt, even though the current copyright law explicitly allows for such "ephemeral reproduction" where analog transmissions are concerned. Moreover, with respect to "webcasters" and digital audio subscription services, Section 415 introduces a number of ambiguities and uncertainties into the scheme of the law relating to "ephemeral reproduction." Although the DFC does not have an organizational position on the merits of Section 415, we are concerned that provisions with such far-reaching possible importance for consumers might become part of our law without any opportunity for public debate or discussion.

Section 416. This section concerns the assumption of contractual obligations related to transfer of rights in motion pictures. Although the floor statements on H.R. 2281 do nothing to reveal the purpose or likely effect of its inclusion, Section 416 appears to represent an agreedupon solution to the long war between directors and producers over their relative rights in studiomade films.

Section 417. This short provision innocuously is described through its title as a mere "clarification" of the first sale doctrine. In fact, it would reverse a recent unanimous Supreme Court decision, with potentially significant adverse impacts for ordinary consumers.

The sponsors of H.R. 2281 offered no explanation for the inclusion of this provision, which appeared for the first time in the version of that bill which came to the House floor on August 4. Section 417 is no mere clarifying technical change to the first sale doctrine codified in 17 U.S.C. 109(a). In fact, adoption of this "stealth" provision as part of the Digital Millennium Copyright Act would have the effect of reversing the Supreme court's recent, unanimous, and widely approved L'anza decision, 118 S.Ct. 1125 (1998), without the benefit of any prior legislative deliberation whatsoever. In L'anza, the Court held that, under certain circumstances, goods which had been licensed by U.S. copyright owners for sale abroad could be re-imported into the United States for domestic sale by virtue of the "first sale" doctrine.

The difficult and controversial issue of "parallel importation" is not one on which the DFC has taken a position, since it lies entirely outside the realm of the digital copyright issues with which our organization is concerned. The issue does not pit American copyright owners against foreign "pirates." Instead, there are important domestic interests on both sides: copyright owners, who are seeking the highest possible prices for the goods they license, and consumers, retailers and discount store operators, who believe that permitting "parallel imports" contributes to overall fair pricing in the domestic marketplace. Clearly, the rights and wrongs of the issue deserve substantive consideration before legislative action is taken.

WIPO Treaty Implementing Provisions

Overall, the core provisions of the DMCA represent a compromise which significantly advances the interests of the information consumers, educators, librarians, and technology innovators represented within the DFC. We continue to support balanced implementing legislation of appropriate scope, as further described below.

Fair Use. With respect to "fair use," the House adopted an alternative to the Senate version of section 1201(a)(1) that would authorize the Secretary of Commerce to selectively waive the prohibition against the act of circumvention to prevent a diminution in the availability to individual users of a particular category of copyrighted materials. (As adopted by the Senate, this section would have established a flat prohibition on the circumvention of technological protection measures to gain access to works for any purpose.) Under the compromise embodied in the House version of the bill, the Secretary of Commerce would have authority to address the concerns of libraries, educational institutions, and others potentially threatened with a denial of access to categories of works in circumstances that otherwise would be lawful today. We cannot support WIPO implementing legislation that does not contain at least this level of fair use protection for the public.

Consumer Products. From the outset of the debate, we have sought to ensure that the anticircumvention provisions of the bill governed only "black boxes" and not legitimate products that have substantial noninfringing uses, such as VCRs and computer products. We were heartened that the Senate included in its bill a "no mandate" provision (however circular in its drafting) that seemed to confirm that nothing in S. 2037 could be interpreted as a mandate on product manufacturers to design telecommunications, consumer electronics, and computing products so as to affirmatively respond to or accommodate technological protection measures that copyright owners might use to deny access to or the copying of their works. The House Commerce Committee made an important contribution by eliminating the potential for misinterpretation of the "no mandate" provision of the bill. We urge you to oppose any efforts to weaken this provision, as they could have no purpose other than to expand the scope of the bill beyond true black boxes.

Encryption Research. The House Commerce Committee also adopted specific provisions making it clear that the bill is not intended to prohibit legitimate encryption research. We support this provision, but believe that it should be broadened to ensure that legitimate security systems testing and research may be conducted as well. In its current form, the bill could imperil computer systems and networks throughout the country, criminalize many university courses and much research in information security, and severely disrupt a growing American industry in information security technology. We therefore urge you to support efforts to amend the bill so that it may not be interpreted to outlaw legitimate security systems testing and research.

Privacy Protection. The House Commerce Committee also included two additional provisions to ensure that this legislation would not undermine the efforts of consumers to protect their personal privacy. One amendment would create incentives for website operators to disclose whenever they use protection measures that have the capability to gather personal data, and to give consumers a means of disabling them. The second amendment makes explicit that the term "copyright management information" does not include "any personally identifying information about a user of a work or a copy, phonorecord, performance, or display of a work." These two amendments are essential to helping preserve balance between the interests of copyright owners and the privacy interests of information users.

Conclusion

We have long supported enactment of WIPO implementing legislation of appropriate scope and balance. We urge you to strike the controversial, extraneous measures added to the bill in the House and to produce a bill that implements the WIPO copyright treaties in a balanced way.